Not so long ago—just last fall, in fact—Bank of America was in the news for all the wrong reasons. The company had instituted a $5 debit card fee, and faced a strong consumer backlash as a result. The incident was at least partly responsible for giving rise to the movement dubbed Bank Transfer Day.
It was likely in the works earlier, of course, but the country’s second largest back is back in the spotlight with a very different initiative. This one, however, is designed to help customers save money. In a pilot program being rolled out this week (to employees only, for now), the bank’s online customers will receive discounts from selected retail partners based on their previous spending patterns. Customers don’t even need to sign up for the service or go to a separate site, a la Groupon, discounts will be awarded in the form of cash payments once a month.
The savings won’t be immediate. Online customers will see discount offers embedded in their bank statements, or potentially in a separate tab, and buy what they choose, paying full price, then receive cash back in their accounts.
Perhaps most interestingly, the bank itself will receive no compensation from the retailers and merchants involved. It will instead use the discounts to extend relationships with existing customers—who will use their bank accounts and credit cards in the process—and of course draw new ones. For the record, BofA says it won’t share incoming customer spending data with the retail partners or anyone else, through presumably it will use the information internally.
While other banks have launched similar efforts, BofA is likely the largest financial services institution to enter this nascent field. This also means that there will be a flood of other financial institutions plunging into the business. As consumer spending patterns and habits evolve in the age of online shopping driven by social media tools and techniques, this is exactly the kind of forward-thinking initiative the industry needs to build on.
Many financial services firms still have the mentality that, in a sense, they need to remain above the fray. They finance these initiatives but they’re not directly involved, since it’s not a core competency. That may be true, but the reality is that they have the resources, they have the technology, they have the information, and most of all they have the customers. For banks to stay completely out of the transaction means denying themselves potentially significant revenue streams.
As other financial institutions enter the fray, we will likely see the process becoming simpler and more commoditized—the savings will be immediate, retailers will share the revenue, and so on. If that’s the case, then this initiative could be seen as a major turning point. Let us know your thoughts by posting below, or Tweet @bankingdotcom.